Governments use taxes and subsidies to change incentives in ways that influence consumer and producer behavior, shifting the supply and demand curves accordingly.

Taxes and subsidies affect government revenues or costs.

Government intervention in a market producing the efficient quantity through taxes, subsidies, price controls, or quantity controls can only decrease allocative efficiency.

Deadweight loss represents the losses to buyers and sellers as a result of government intervention in an efficient market.

The incidence of taxes and subsidies imposed on goods traded in perfectly competitive markets depends on the elasticity of supply and demand.

Explain (using graphs where appropriate) how government policies alter consumer and producer behaviors that influence incentives and therefore affect outcomes.

Calculate (using data from a graph or table where appropriate) changes in market outcomes resulting from government policies.